How to set up inventory groups

In MKG, you use inventory groups to divide items or purchases into different groups. Inventory groups can be used for items, for material lines of production orders, for calculations and bill of materials, for production orders and semi-finished product lines, and for sales order and purchase order lines. The settings of the inventory group(s) can be found in the process table Inventory Groups.

Within an inventory group, general ledger accounts can be assigned. Financial mutations related to inventory groups pertain to a mutation regarding inventory, revaluation, price differences, and/or costs. In the case of a financial basic setup, 'Material' and 'Price Differences' are the main categories. In an extensive financial setup, the other fields are also filled with the applicable general ledger accounts.

For the financial basic setup, two basic inventory groups are assumed: Purchases for orders and Costs.

Purchases for orders

A general ledger account is assigned to an inventory group for the purchase for orders and the price differences. This provides insight into the actual costs of the purchased material. The account for price differences must be of the type 'Loss and Profit'.

In a financial basic setup, the general ledger accounts will refer to general ledger accounts with the property 'Loss and Profit', often accounts in the 7000 group. In this setup, the purchase is a final booking, there is no transfer from work in progress to cost price sales. At the time of material purchase, the cost price booking must already be made.

In an extensive financial setup, where the material inventory is also booked in the balance sheet, we use general ledger accounts with the property 'Balance'. These are often general ledger accounts in the 3000 group. In this setup, upon purchase, the material is first booked to inventory, then to work in progress, and finally to cost price sales.

Costs

In this inventory group, it concerns the general ledger accounts on which process-related purchases are booked that are not created from a need on a production order. It concerns purchases that are handled within the organization through the purchase process. For this type of inventory groups, only one general ledger account (cost account) needs to be assigned. Examples of costs include footwear and overalls for employees and general production costs, such as welding wire, chisel inserts, and cooling oil.

It is not mandatory to handle these purchases process-wise, but this makes ongoing purchases transparent. When there are items without the property 'Cost Item' within an inventory group with costs, a general ledger account for price differences must be entered.